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Defining Benchmark Status: An Application using Euro-Area Bonds

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  • Peter G. Dunne
  • Michael J. Moore
  • Richard Portes

Abstract

The introduction of the euro on 1 January 1999 created the conditions for an integrated government bond market in the euro area. Using a unique data set from the electronic trading platform Euro-MTS, we consider what is the benchmark' in this market. We develop and apply two definitions of benchmark status that differ from the conventional view that the benchmark is the security with lowest yield at a given maturity. Using Granger-causality and cointegration methods, we find a complex pattern of benchmark status in euro-area government bonds.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9087.

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Date of creation: Aug 2002
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Handle: RePEc:nbr:nberwo:9087

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  1. Gabriele Galati & Kostas Tsatsaronis, 2001. "The impact of the euro on Europe's financial markets," BIS Working Papers 100, Bank for International Settlements.
  2. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  3. Robert N McCauley, 1999. "The Euro and the Liquidity of European Fixed Income Markets," CGFS Papers chapters, in: Bank for International Settlements (ed.), Market Liquidity: Research Findings and Selected Policy Implications, volume 11, pages 1-26 Bank for International Settlements.
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  5. Antonio Scalia & Valerio Vacca, 2001. "Does market transparency matter? A case study," BIS Papers chapters, in: Bank for International Settlements (ed.), Market liquidity: proceedings of a workshop held at the BIS, volume 2, pages 113-144 Bank for International Settlements.
  6. Barassi, Marco R & Caporale, Guglielmo Maria & Hall, Stephen G, 2001. "Irreducibility and Structural Cointegrating Relations: An Application to the G-7 Long-Term Interest Rates," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(2), pages 127-38, April.
  7. Roberto Blanco, 2001. "The Euro-Area Government Securities Markets. Recent Developments and Implications for Market Functioning," Banco de Espa�a Working Papers 0120, Banco de Espa�a.
  8. Missale, Alessandro, 1999. "Public Debt Management," OUP Catalogue, Oxford University Press, number 9780198290858, September.
  9. Roberto Blanco, 2002. "Euro area government securities markets: recent developments and implications for market functioning," BIS Papers chapters, in: Bank for International Settlements (ed.), Market functioning and central bank policy, volume 12, pages 65-85 Bank for International Settlements.
  10. Davidson, James, 1998. "Structural relations, cointegration and identification: some simple results and their application," Journal of Econometrics, Elsevier, vol. 87(1), pages 87-113, August.
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Cited by:
  1. Dimitris A. Georgoutsos & Petros M. Migiakis, 2009. "Benchmark bonds interactions under regime shifts," Working Papers 103, Bank of Greece.
  2. Stefano Schiavo, 2005. "Euro bonds: in search of financial spillovers," Sciences Po publications 2, Sciences Po.
  3. Lucjan T. Orlowski & Kirsten Lommatzsch, 2005. "Bond Yield Compression in the Countries Converging to the Euro," William Davidson Institute Working Papers Series wp799, William Davidson Institute at the University of Michigan.
  4. Sergio Mayordomo & Juan Ignacio Peña & Eduardo S. Schwartz, 2009. "Towards a Common European Monetary Union Risk Free Rate," NBER Working Papers 15353, National Bureau of Economic Research, Inc.
  5. Kleimeier,Stefanie & Sander,Harald, 2005. "Regional Versus Global Integration of Euro Zone Retail Banking Markets: Understanding the Recent Evidence from Price-Based Integration Measures," Research Memorandum 031, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  6. Menkveld, Albert J. & Cheung, Yiu Chung & de Jong, Frank, 2004. "Euro area sovereign yield dynamics: the role of order imbalance," Working Paper Series 0385, European Central Bank.
  7. Coluzzi, Chiara & Ginebri, Sergio & Turco, Manuel, 2008. "Measuring and Analyzing the Liquidity of the Italian Treasury Security Wholesale Secondary Market," Economics & Statistics Discussion Papers esdp08044, University of Molise, Dept. EGSeI.
  8. Favero, Carlo & Pagano, Marco & von Thadden, Ernst-Ludwig, 2010. "How Does Liquidity Affect Government Bond Yields?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(01), pages 107-134, February.
  9. Alessandro Beber & Michael W. Brandt & Kenneth A. Kavajecz, 2006. "Flight-to-Quality or Flight-to-Liquidity? Evidence From the Euro-Area Bond Market," NBER Working Papers 12376, National Bureau of Economic Research, Inc.
  10. Marta Gómez-Puig, 2007. "EU-15 sovereign governments' cost of borrowing after seven years of Monetary Union," Working Papers 07-03, Asociación Española de Economía y Finanzas Internacionales.
  11. Carlo Favero & Marco Pagano & Ernst-Ludwig von Thadden, 2005. "Valutation, Liquidity and Risk in Government Bond Markets," Working Papers 281, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.

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